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Q-118. Which of the following risks is specifically recognized by the incremental risk charge (IRC)?
A
Expected shortfall risk, because it is important to understand the amount of loss potential in the tail.
B
Jump-to-default risk, as measured by 99.9% VaR, because a default could cause a significant loss for the bank.
C
Equity price risk, because a change in market prices could materially impact mark-to-market accounting for risk.
D
Interest rate risk, as measured by 97.5% expected shortfall, because an increase in interest rates could cause a significant loss for the bank.
